Both basal and submucosal gland (SMG) duct stem cells of the airway epithelium are capable of sphere formation in the in vitro sphere assay, although the efficiency at which this occurs is very low. We sought to improve this efficiency of sphere formation by identifying subpopulations of airway basal stem cells (ABSC) and SMG duct cells based on their aldehyde dehydrogenase (ALDH) activity. ALDH(hi) ABSCs and SMG duct cells were highly enriched for the population of cells that could make spheres, while the co-culture of ALDH(hi) differentiated cells with the ALDH(hi) ABSCs increased their sphere-forming efficiency. Specific ALDH agonists and antagonists were used to show that airway specific ALDH isozymes are important for ABSC proliferation. Pathway analysis of gene expression profiling of ALDH(hi) and ALDH(lo) ABSCs revealed a significant upregulation of the arachidonic acid (AA) metabolism pathway in ALDH(hi) ABSCs. We confirmed the importance of this pathway in the metabolism of proliferating ALDH(hi) ABSCs using bioenergetics studies as well as agonists and antagonists of the AA pathway. These studies could lead to the development of novel strategies for altering ABSC proliferation in the airway epithelium.